UK Why banning fees will put up your car insurance

Why banning fees will put up your car insurance

Read more: http://www.thisismoney.co.uk/money/news/article-2049518/Why-banning-fees-car-insurance.html#ixzz1aztmlM4k

Henry Engelhardt has become used to running a stock market darling. Such is the success of the Admiral insurance group – which also owns the Elephant and Diamond brands and price comparison site confused.com – that it is planning to increase its almost exclusively Welsh workforce from 4,200 to 7,000 in the next five years.
But in recent weeks the Chicago-born chief executive has had to contend with a serious setback. Last month the Government said it would press ahead with a ban on controversial injury referral fees, which Admiral says accounts for more than five per cent of overall profits.
Before the announcement, Engelhardt, 53, said he would not follow rival Axa in ending referral fees – where lawyers pay companies that pass on claims work to them and which are blamed for increasing the cost of car insurance.
At the time he told Financial Mail: ‘If the Government wants to tackle this they need to cap for injuries such as whiplash at say £750 and £150 to lawyers. At the moment victims can get £2,000. If referral fees are banned, the result would be car insurance would go up. I hope someone is intelligent enough to say why we are we paying big referral fees.’

Sporting chance: Admiral, led by Henry Engelhardt, sponsors the Welsh rugby team
Engelhardt now says that if a ban is implemented, lawyers will tout even harder for fees, a practice that has developed over the past decade as Legal Aid has been withdrawn.
In August Engelhardt made the boldest statement about the company’s future when he and chairman Alastair Lyons bought £540,000 of Admiral shares when the price dropped after analysts worried about growth prospects and a rising tide of claims.
Admiral’s shares may have slipped to 1277p when the pair bought their tranche, but they have since fallen further to close at 1263p on Friday, including a seven per cent fall in two days following the announcement on referral fees.
Engelhardt says that despite August’s interim pre-tax profits rising 27 per cent to £160.6million, with half-year sales passing £1billion for the first time, the market was wrongly judging the group only on its rapid growth in the past few years.
A robust relationship with industry analysts continues. Last weekend Admiral was busy defending itself against Oriel Securities’ Marcus Barnard, who said the company was employing two sets of accounts in order to inflate its value by overestimating the cost of future insurance cases.

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Engelhardt says the difficulty is trying to predict the size of new claims in coming years. ‘It’s a bit like trying to say what the weather is going to be like in the last week of November,’ he says.
Engelhardt started work as a runner in the bearpit of Chicago’s Mercantile Exchange before saving up to study for an MBA after following his childhood sweetheart back to France. They have since married, live near Cardiff, and have four children.
A job at car insurer Churchill, now owned by Royal Bank of Scotland, followed a response to an anonymous advert calling for a sales and marketing specialist. Success at Churchill resulted in Lloyd’s of London agent Hayter Brockbank seeking him out to launch Admiral.
As the economy has become tougher, Engelhardt has detected a rise in insurance claim fraud. ‘There’s a greater number of accidents being manufactured,’ he says. ‘In 2000 to 2004 we saw far more vehicles being stolen, which we’re not seeing this time round. Either they’re better protected or they’re not worth as much.’
Another problem is how to offer reasonably priced insurance to teenage drivers, who are often all tarred as ‘boy racers’.
‘Black box telematics’ schemes in which GPS systems track drivers’ time of driving, speed and braking, could mean that not all teenagers will be hit with expensive policies aimed at the most reckless drivers in the age range.
Engelhardt scored 98.8 per cent in his test, he is pleased to announce. ‘It’s not far into the future when they’ll be in every new car,’ he says.
Admiral, online provider Elephant and Diamond, aimed at women drivers, performed well during the year, delivering profits of £168.2million in the UK. Engelhardt says an EC ruling that female-focused insurance is discriminatory is unlikely to affect the company until late 2012.
He thinks that the implications of the legislation are not going to be popular. ‘It’s not going to mean lower rates for young men – it’s more likely to mean higher rates for young women,’ he says.
A greater headache for Engelhardt is the future of confused.com, the comparison site that posted interim profits down 6.8 per cent to £8.2million as competitors such as comparethemarket.com and moneysupermarket.com have increased spending on adverts.
Nevertheless, Engelhardt is upbeat, saying its revenues are already better than the second half of last year. ‘We’ve made a lot of changes to the website, making it much quicker,’ he says.
Despite Wales crashing out of the Rugby World Cup yesterday – Admiral sponsors the team – the future for the group looks bright, despite a £3.2million loss on overseas business for the half year.
Engelhardt says the continued growth of Admiral is unlikely to be stalled by the recession, as people will always need to insure their vehicles.
That’s good news for the Welsh economy as the group will continue to expand its Cardiff, Swansea and Newport sites and is building a vast new building in the capital.


Read more: http://www.thisismoney.co.uk/money/news/article-2049518/Why-banning-fees-car-insurance.html#ixzz1aztvWwqz